Pent up demand from homebuyers caused an influx of mortgage applications last week, according to the Mortgage Bankers Association. The volume of purchase applications for home loans increased 6.4 percent over the previous week and was only 1.5 percent lower than the same period a year ago, signaling a potential rebound in buyer interest.
“Applications for home purchases continue to recover from April’s sizeable drop and have now increased for five consecutive weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase activity – which was 35 percent below year-ago levels six weeks ago – increased across all loan types.”
Applications for federally-backed mortgages, including FHA, VA and USDA loans, are five percent higher than they were at this time last year, yet another promising takeaway.
Commenting on the data, research firm Oxford Economics wrote that these figures could “point to a bounce in home sales in May or June” once purchasers have been approved for a mortgage and eased social distancing measures allow for more flexibility with property showings.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 remained largely unchanged, declining to 3.41 percent from 3.43 percent. Mortgage points ticked up from 0.29 to 0.33, including the orientation fee, for 80 percent loan-to-value ratio loans.
The total number of refinancing applications fell 6.3 percent over last week despite near-record-low mortgage rates as lenders cut back on issuing home equity lines of credit (HELOCs) and tightened borrowing requirements. That being said, refinancing activity is up 160 percent compared to the same time last year when interest rates were substantially higher.
“We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates,” said Kan. “With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets.”